6 Arpil 2015
India Update: Highlights of the Foreign Trade Policy 2015-2020

On 1 April 2015, the Commerce Minister, Nirmala Sitharaman introduced the Foreign Trade Policy 2015-2020 with an underlying focus to support services and exports along with improving the ease of doing business in India. Making Indian goods and services visible on the global footprint has long since been on the cards of the Ministry and the present policy is all out to promote 'Brand India'. Further, since Information Technology has changed the way many live and operate in every walk of life, it was proposed to extend the technological advantage to the benefit of the exporters and eventually reduce human intervention with the department.
 
Comprehensive analysis
Reward Schemes Under FTP Simplified and Merged
Merchandise Exports from India Scheme (MEIS)
  • Merger of the existing Export Incentive Schemes i.e. Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agricultural Infrastructure Incentive Scrip, Vishesh Krishi and Gram Udyog Yojana, into a new scheme - Merchandise Exports from India Scheme
  • The rewards are proposed for exports of specified goods to notified markets on the basis of a foreign exchange realisation of the FOB value of exports or on the FOB value of exports mentioned in the shipping bill in foreign exchange, whichever is less.
  • MEIS benefits have also been made applicable to the export of goods through courier services and foreign post offices using e-commerce platforms, subject to the fulfilment of conditions. Ineligible categories under MEIS have also been defined.
  • Notified markets would be divided into three categories:
    • Category A (comprising of countries belonging to the traditional markets such as the European Union, the United States and Canada);
    • Category B (comprising of countries belonging to the emerging and focus markets such as ASEAN countries, Japan, South Korea, China and Taiwan); and
    • Category C (comprising of countries belonging to other markets) .
Service Exports from India Scheme (SEIS)
  • The Served From India Scheme (SFIS) has been replaced by Service Exports from India Scheme (SEIS) which provides rewards to all service providers of notified services, providing services from India.
  • The rate of reward, issued as a duty credit script under SEIS, would be based on the net foreign exchange earned. The present rates of reward are 3% and 5%.
  • The reward issued as duty credit scrip, would be freely transferable and usable for all types of goods and services tax debits on procurement of services or goods. Debits would be eligible for CENVAT credit or drawback.
Common regulations pertaining to the aforesaid schemes
  • The MEIS and SEIS incentive schemes are proposed to be extended to units located in SEZ
  • Duty credit scripts to be freely transferable and usable for payment of custom duty, excise duty and service tax, subject to certain restrictions.
  • Free Foreign Exchange earned through international credit cards and other instruments, as permitted by RBI shall also be taken into account for computing the value of the exports
  • All duty scripts and the goods imported against these scripts would be fully transferable
 
Status Holders
  • Status holder recognition to be given to business leaders who have contributed to the country's foreign trade. Special treatment and privileges are proposed to be extended to such holders to facilitate their trade transactions and to reduce their transaction costs and time.
  • The nomenclature of the Export House, Star Export House, Trading House, Star Trading House, Premier Trading House certificate has been changed to One, Two, Three, Four, Five Star Export House.
  • The criteria for export performance for recognition of a status holder have been changed from Indian Rupees (INR) to US dollar earnings and have been defined under the Policy.
  • Manufacturers, who are also status holders, can now self-certify their manufactured goods in phases, as originating from India with a view to qualifying for preferential treatment under various forms of bilateral and regional trade agreements.  This 'Approved Exporter System' will help manufacturing exporters considerably in getting fast access to international markets.
Export Promotion of Capital Goods Scheme (EPCG)
  • Under the EPCG scheme, local procurement of capital goods is permitted without payment of excise duty, provided the export obligation equivalent to 90% of six times the duty saved (calculated as per notional customs duty) is achieved in six years. The said obligation is now reduced to 75% of the total export obligation to promote domestic capital goods' manufacturing industry.
  • The time period for maintaining records by the EPCG authorisation holders is reduced from three years to two years.
  • To encourage manufacturing of capital goods in India, EPCG authorisation holders shall not be eligible for exemption from payment of anti-dumping duty, safeguard duty and transitional product specific safeguard duty on import of capital goods.
  • The condition of obtaining and submitting certificates from an independent chartered engineer for confirming the use of spares, tools, refractory and catalysts at the time of final redemption of the EPCG license is dispensed.
Deemed Exports and Advance Authorisation
  • Online filing for refund of terminal excise duty (TED) is introduced for which the new Aayat Nirayat Form (ANF) is prescribed.
  • Imports against advance authorisation shall also be eligible for exemption from Transitional Product Specific Safeguard Duty.
  • The export obligation period for export items falling in the category of defence, military store, aerospace and nuclear energy has been extended from the current 18 month period to 24 months from the date of issue of advance authorisation or co-terminus with contracted duration of the export order, whichever is later.
Trade Facilitation and Ease of Doing Business
  • Promoting the 'Go Green' initiative by shifting from paper to paperless trade with online filing of documents in a 24x7 business environment.
  • Online inter-ministerial consultations are proposed to accord approval for export of SCOMET items, norms fixation, import/export authorisation in a phased manner thereby saving valuable time.
Quality Complaints and Trade Disputes
  • Aiming to uphold the prominence of India as an 'exporter'and abiding relationships with foreign suppliers, a mechanism of redressing grievances and trade disputes has been formulated. Accordingly a Committee on Quality Complaints and Trade Disputes (CQCTD) is to be constituted across 22 offices of regional authorities (RAs) of DGFT.
  • The main function of CQCTD is enquiring and investigating all quality and trade related complaints. It is endeavored to take quick action and effective steps to redress and resolve complaints within three months of receipt of complaints. Complaints pertaining to the quality of exports from India, quality of imports into India and unethical commercial dealings shall be considered by the CQCTD
  • Provisions pertaining to erring of exporters and importers under the Foreign Trade (Development and Regulation) Act, 1992 and the allied Rules have also been prescribed which pertain to refusal to grant or renew or suspend  licenses, certificates, scripts or any other instruments bestowing financial or fiscal benefits granted to the entity.  
New Initiatives for EOUs, EHTPs, STPs and BTPs
  • Aiming to achieve an ambitious target of annual exports of USD 900 billion by FY 2019-20, certain new initiatives have been taken to reduce efforts and cost to provide a competitive advantage to EOUs, EHTPs, STPs and BTPs in export markets. Sharing of infrastructural facilities and inter unit transfer of goods and services have been allowed amongst them, subject to certain terms and conditions.
  • Similarly, EOUs have been allowed to set up warehouses near the port of export to ensure prompt delivery of goods by reducing the lead time.
  • Eligibility under EOU, EHTP, STP and BTP schemes has been extended to include development of software, agriculture including agro-processing, aquaculture, animal husbandry, biotechnology, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture.
  • The limit of physical export turnover for preceding financial year reduced to INR 100 million (previously INR 150 million) to facilitate EOUs for fast track clearances of import and domestic procurement through pre-authenticated procurement certificates.
  • The period of utililisation of goods, including capital goods,  by EOUs, EHTPs, STPs, BTPs, shall be upto the validity of Letter of Permission, in place of the previous limit of three years.
  • A simplified procedure will be provided/notified to fast track the de-bonding/exit of the STP or EHTP units to save time and cost for units.
The aforesaid policy has been formulated for a period of five years, with a mid-term review after two and a half years, except for exigencies. This has been seen in line with the manifesto of the present government - minimum government, maximum governance. However, in an attempt to achieve greater policy coherence and mainstreaming of all export incentive schemes, the commerce department will now direct state governments to prepare their own export strategies based on the new trade policy.

While the much awaited Goods and Services Tax stands exactly a year away, India is hopeful to yield the benefits of the combined synergies of the new tax regime along with the export incentives, thus paving the way for the state of the art indirect tax regime.

SKP
19 Adi Marzban Path | Ballard Estate | Fort | Mumbai 400 001 | India  
+91 22 6730 9000 | skpgrp.info@skpgroup.com | www.skpgroup.com

Mumbai | Pune | Hyderabad | New Delhi | Chennai | Bengaluru

LinkedIn
Twitter
Facebook
Google Plus
ABOUT THIS UPDATE
This SKP Update contains general information existing at the time of its preparation only. It is intended as a news update and is not intended to be comprehensive nor to provide specific accounting, business, financial, investment, legal, tax or other professional advice or opinion or services. This update is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional adviser and also refer to the source pronouncement/documents on which this update is based. It is also expressly clarified that this update is not a solicitation or an invitation of any sort whatsoever or a source of advertising from SKP Group or any of its entities to create any adviser-client relationship.

Whilst every effort has been made to ensure the accuracy of the information contained in this business alert, this cannot be guaranteed, and neither SKP Group nor any related entity shall have any liability to any person or entity that relies on the information contained in this publication. Any such reliance is solely at the user's risk.  


 © 2015 SKP Group. All rights reserved.